The information content of dividends refers to
A) nonpayment of dividends by corporations.
B) dividend changes as indicators of a firm's future.
C) a stable and continuous dividend.
D) a dividend paid as a percent of current earnings.

Question

Quizplus · Accepted Answer

The information content of dividends refers to the use of dividend changes as indicators of a firm's future prospects. A change in dividend policy may signal that a company's management is confident about the future and expects sustained earnings growth, or it may signal financial distress or uncertainty about future cash flows. Therefore, changes in dividend patterns can signal important information about a company's financial health and future prospects.

The Information Content of Dividends Refers to